Moloney v Smith - [2004] SADC 115

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MOLONEY v SMITH
Reasons of His Honour Judge Lunn
25 August 2004
CONTRACTS
Retainer of solicitor to act in unfair dismissal claim - allegations of misrepresentations about likely success and total costs rejected - held implied terms of duties of solicitor to advise on likely total costs of the litigation and the possible adverse consequences in costs if a settlement offer was rejected - both duties breached - held no loss proved from the breaches as the client had not shown she would have acted any differently if the duties had been fulfilled - judgment for the plaintiff for $23,647.80 for the balance of legal costs and pre-judgment interest - counterclaim dismissed.

MOLONEY v SMITH
[2004] SADC 115
Introduction

On 20 November 2000 the plaintiff issued a summons in the Magistrates Court claiming $18,647.80 from the defendant being the balance of its charges for legal professional services rendered. On 17 April 2001 the defendant filed a defence and a counterclaim for $94,750.80. The action was transferred into this Court. An amended defence and counterclaim was filed which was further substantially amended during the course of the trial.
The principal participants
The Whyalla Senior Citizens Welfare Association Inc (“the Employer”) is an association which operates a forty eight bed aged and dementia care home at Whyalla known as Yeltana. Up until early 1999 Ms Lavery was its chief executive officer.
Jocelyn Smith, the defendant, (“Mrs Smith”) is 62 years of age. She had worked for just over forty years as a registered nurse. For fourteen years prior to 1999 she had worked for the Employer at Yeltana as a registered nurse working day shifts. She had had no previous experience with litigation or lawyers.
John Smith (“Mr Smith”) is the husband of Mrs Smith. He is also 62 years of age. Until he retired in 2000 he had been a police officer for forty years. From 1984 until his retirement he had been a senior sergeant in charge of the police station at Whyalla. Although as a police officer he had some knowledge of criminal law, he had little experience of courts, lawyers or civil litigation. From 1995 to 1997 he was an alderman on the Whyalla City Council and from 1997 until 2003 he was the mayor of Whyalla, which was then the biggest regional city council in South Australia.
Peter Moloney, the plaintiff, is an experienced Adelaide lawyer who is the sole proprietor of the legal practice of Moloney & Partners. One of his specialities is industrial law which includes unfair dismissal claims. He employs a number of solicitors to assist him in running his practice.
Lena Carbone is a solicitor who has been employed by Mr Moloney since December 1992. She has had considerable experience in unfair dismissal claims.
Terrence McRae is a senior barrister at the independent bar. He has very great experience in industrial and unfair dismissal cases.
Overview[1]
[1] Most of the history set out in this overview was not in dispute. It is based primarily on the contemporaneous documents in the plaintiff's file. Insofar as it contains conclusions on disputed matters I find them proved for the reasons set out below.
In about November 1998 a dispute arose between Mrs Smith and Ms Lavery about Mrs Smith’s programmed days off (“PDOs”) and the practices at Yeltana concerning PDOs for nursing staff. Mrs Smith approached the Department of Labour and Industry about the issue. She considered that Ms Lavery and the Director of Nursing were not responding to her complaints. In January 1999 a further issue arose between Mrs Smith and her superiors over the workload imposed on nursing staff by a resident who required dialysis. It is not necessary to go into the details. On 25 January 1999 a resident, who was in the care of Mrs Smith, died at the home. She had attempted unsuccessfully to resuscitate him using equipment provided by Yeltana for the purpose. She alleged that the equipment which she had used had not operated properly. She became extremely distressed at the death of this resident. She did not return to work after 25 January, and has never worked since. Her general practitioner gave her medical certificates for depression and anxiety conditions allegedly resulting from her employment and she claimed, and was apparently paid, some workers compensation.
On 27 January 1999 Mrs Smith, in conjunction with her husband, wrote a letter to all the members of the Board of the Employer which she had delivered to the members at their homes. Part of the letter read:
“…
You are all aware of an ongoing dispute I have with the C.E.O. regarding P.D.O.S but this letter is not about that issue which will now be resolved in another place, however, the consultation processes (or lack thereof) I experienced in that matter are related to the issues I am about to complain of.
I draw your attention to the increased workload that has been placed on R.N.s with the admission of a resident requiring peritoneal dialysis. The schedules worked out for his four daily treatments have placed an impossible workload on the afternoon shift R.N.s of which I am the principal. The workload is such that I now find that the level of care for all other residents at Yeltana has diminished considerably; so much so that my Duty of Care has been compromised to the extent that I am very concerned that serious mistakes in medication and treatment will be made. In fact, on the evening of 25^th January a resident died as a result of equipment failure and inadequate time on my behalf to devote to all residents equitably including the deceased. As a cause of death has not been stated on the death certificate this matter may become a Coronial Enquiry and if required to do so I will give evidence to such an inquiry disclosing what happened and the reasons why this man died as I see them from my professional viewpoint. I will not be held responsible for inadequacies of staffing levels and working procedures imposed upon nursing staff without proper consultation and/or consideration for the nursing professionals’ points of view.
The senior nursing staff, including myself, have repeatedly brought this deteriorating situation to the notice of the C.E.O. and the acting D.O.N. All I get from the C.E.O. is … ‘Helen has it in hand’. What I get from the Acting D.O.N. is … ‘It has to be done and your (sic) will do it.’ So much for consultation!
…
As nothing seems to be done or any interest in the problems I have described is being shown by the C.E.O. and acting D.O.N. I appeal to Board members to take it upon themselves to intervene in what has become a most serious and dangerous situation with implications under the Nurses’ Award conditions, the Occupational Health and Safety Requirements and Workcover let alone any private litigation that could be taken by relatives of residents if a diminished standard of care and neglect can be proven as I am alleging is occurring.
…
The consulting process and management style with regard to staff relations and work procedures leaves much to be desired as other serious staff issues still pending and unresolved indicate. To allow situations to develop to the stage this situation has is an indictment on the ability of those who manage. Serious situations such as I have described should never reach the stage where residents, staff and others are jeopardised and proper medical procedures are compromised. Early intervention and the ability to listen are qualities that are not practiced here.
…”
The hostile attitude, and belligerence, of Mrs Smith was further demonstrated by the following letter which she wrote in conjunction with her husband to the chief executive officer of the Employer on 29 January 1999, which read in part as follows:
“…
As for your letter of 27^th Jan. I am highly offended by the tone and content of it and your incredible attempt to silence me. I will not be silenced with bribe like offers of a day’s pay. This letter will be part of my evidence along with your other letters when this matter is listed for Court.
You have one course of action left open to you to avoid a Court hearing and the inevitable adverse publicity that will accompany it.
I demand that within 7 days from the receipt of this letter that you retract your instructions to me regarding P.D.O.s along with a further demand that you enter into meaningful discussions with me to reach a mutually agreeable method of managing my P.D.O.s … I will not accept the arbitary (sic) and dictatorial manner in which you have approached this whole issue completely disregarding your responsibilities under the Nurses’ Award and any consideration for myself.
…
I resent your attempt to twist and manipulate the facts in an attempt to blame me for the ineptitude of your own of your own administration staff.
I further demand (not request) that I receive a full, unequivocal written apology from you for the manner in which you have handled this whole affair and for giving me incorrect information on a simple matter which if handled in a proper and considerate manner promptly at the time it arose I would not now be forced to seek litigation to secure my rights.
I further demand that Ms STUPPOS also give me an unconditional written apology for her part in this whole unfortunate business, details of which I have given in a previous letter.
…
I will no longer tolerate your dictatorial attitudes towards me which is exacerbating my workplace stress.
In conclusion, do not for one moment doubt my resolve to follow this matter through to a fair and equitable result. I intend to see that justice is done and you are held accountable.
My patience and tolerance with you is now exhausted.”
The Board of the Employer responded to the allegations in the letter of 27 January by appointing an independent nursing consultant, Ms Carla Barron, to investigate the serious allegations raised. Ms Barron interviewed Mrs Smith on 30 January 1999. Ms Barron reported to the Employer that during the interview Mrs Smith had changed her mind and indicated she did not believe that any equipment failure had contributed to the death of the resident. However, Mrs Smith has since disputed that she resiled from that allegation. The report of Ms Barron apparently did not substantiate Mrs Smith’s complaints.
On 10 February 1999 Mrs Smith received a letter from Ms Lavery setting out sixteen allegations of serious misconduct by Mrs Smith in the performance of her duties as a registered nurse at Yeltana. It is not necessary to go into them in detail. The first five alleged that in spite of being previously counselled and warned on two separate occasions she had continued to engage in improper and unsafe practices in dispensing medication (“the 5 dispensing allegations”). Mrs Smith has always strenuously denied that she ever dispensed any medications in an improper and unsafe manner and that she was ever counselled or warned about such practices. Such allegations, if well-founded, were very serious and would have justified her instant dismissal, and possibly the cancellation of her registration as a registered nurse. The subsequent litigation turned primarily on the outcome of these 5 dispensing allegations.
The letter also alleged breach of proper practices in Mrs Smith communicating directly with the Board by the letter of 27 January, in making untrue allegations in that letter, in denigrating the name of the Employer and in breaching confidentiality, but these other matters, while significant, were of lesser importance than the 5 dispensing allegations.
Mr and Mrs Smith denied all of the allegations in this letter. Mrs Smith rightly regarded it as a serious attack on her personal honesty, competence and good name. She considered that the allegations were an attempt by the management of the Employer to victimise her and to get back at her for her complaints about them to the Board of the Employer.
The letter of 10 February invited Mrs Smith to a meeting with representatives of the Employer to be held on 15 February to respond to the allegations. She did not attend at that meeting, or at a number of rescheduled meetings, on the grounds of ill health. While she regarded all the allegations as “lies” she did not know what evidence was available to the Employer to prove them. She knew that some of the staff at Yeltana were siding with the management against her, that other staff members were supporting her and that others were ambivalent about who they might support.
On 25 February 1999 Mr and Mrs Smith saw Mr Moloney to instruct him to advise them and to represent Mrs Smith.[2] Mr Moloney took general instructions and prepared a letter for Mrs Smith to send to Ms Lavery stating that she was not yet well enough to respond to the allegations. Mr Moloney included in his notes about that meeting:
“This Lavery lady was a councillor and our client supported opposition to her to which opposition was successful so that she is no longer a councillor. Both client and her husband John think that this Lavery lady is out to get him via his wife and it does not seem to me that this concern on (sic) our client and her husband’s part is unfounded.”
He arranged for Mrs Smith to see Ms Carbone for her to take a full statement about the circumstances of the dispute.
[2] Part of the instructions related to a workers compensation claim by Mrs Smith against the Employer, but that was only minor and was largely left to await the outcome of any unfair dismissal proceedings.
At this meeting on 24 February Mr Moloney had Mrs Smith sign a document entitled “Solicitor/Client Costs Authority” which was witnessed by her husband. It stated that the plaintiff’s costs would be charged on the Supreme Court scale. However, that is not of great significance as in any event the applicable scale of costs for proceedings in the Industrial Commission was the Supreme Court scale. It is likely that in accordance with his general practice Mr Moloney explained to Mr and Mrs Smith the basis on which he charged and mentioned that the hourly rate for solicitor’s work under the Supreme Court scale was then $165 per hour.
On 3 March Ms Carbone saw Mrs Smith for six hours taking a statement from her. She saw her again on 9 March for another six hours to complete the statement and to take a statement from Mr Smith. During this, and subsequent statement taking, Mr Smith was present for some of the time in which Ms Carbone was speaking to his wife but not all of the time. Ms Carbone also drafted a long letter to be given by Mrs Smith to the Employer responding to the allegations in the letter of 10 February. On 19 March Ms Carbone spoke to Mr Smith arranging to send him copies of the statements and the draft letter, telling him that the plaintiff had already done a few thousand dollars worth of work and requesting that he deposit $5,000 into the plaintiff’s trust account on account of costs.
On 25 March Ms Carbone saw Mr Smith for about twenty minutes and discussed the letter to be sent by Mrs Smith to the Employer. He had by then paid $5,000 into the plaintiff’s trust account. Mr Smith asked Ms Carbone whether his wife could claim her legal costs from the Employer when she had done nothing wrong. Ms Carbone advised that she did not think that the Employer would pay them, but suggested that they look at the point further down the track depending on how matters eventuated. I accept her evidence that at that meeting she said that in proceedings in the Industrial Commission there was a general rule that all parties bear their own costs, but there was an ability for a party to obtain an order for costs from the other party where that other party had acted unreasonably.
On 25 March Mrs Smith gave the letter drafted by the plaintiff to the Employer. By a letter of 1 April 1999 the Employer summarily terminated Mrs Smith’s employment on the grounds of serious misconduct as set out in its letter of 10 February. On 12 April Mrs Smith saw Mr Moloney to discuss the letter of 1 April which Mr and Mrs Smith thought was unfair. Mr Moloney prepared a summons to be issued in the South Australian Industrial Relations Commission seeking a determination under s107 of the Industrial and Employees Relations Act 1994 (“the Act”) that the dismissal was harsh, unjust or unreasonable and an order that Mrs Smith be re-employed. On that occasion Mr Moloney noted that he explained to the Smiths “the costs provisions worked (sic) under the Industrial Act for unfair dismissal applications”. I accept his evidence that this explanation was in accordance with his general practice and included a paraphrase of s110 of the Act, which provides:
“Costs
110.(1) If an application under this Part proceeds to hearing and the Commission is satisfied that a party to the proceedings clearly acted unreasonably in failing to discontinue or settle the matter before the hearing concluded, the Commission may, on the application of the other party to the proceedings, make an order for costs (including-if relevant-the costs of representation) against the party.
(2) If an employee discontinues proceedings under this Part more than 14 days after the conclusion of the conference of the parties, the Commission may, on the application of the employer, make an order for costs (including-if relevant-the costs of representation) against the employee if the Commission is satisfied that the employee has acted unreasonably. …”
The summons was issued on 13 April and served on the Employer.
On 6 May Mr Moloney attended with Mr and Mrs Smith at a Conciliation Conference held at the Industrial Relations Commission in Adelaide before Commissioner Huxter. The Employer was represented by Mary Garson, a solicitor, and also present were Ms Lavery and her successor, Ms Holden. Mr Moloney and Ms Garson respectively stated their client’s positions to the Commissioner. Ms Garson did not make any offer of settlement and indicated that the Employer was not prepared to have Mrs Smith back as an employee under any circumstances. Mrs Smith became upset at this intimation and other comments which were made by the Employer’s representatives at the Conference. The Employer’s representatives adopted an aggressive stance which probably angered Mr Moloney.
After the unsuccessful Conciliation Conference Mr Moloney met with Mr and Mrs Smith at a nearby café. He told them that he thought a trial would go for at least five days and would be very expensive. He did not elaborate on what he meant by “very expensive”. He told them they would have to pay some more money into trust if they decided to proceed.
Shortly after the Conciliation Conference Commissioner Huxter issued an assessment and recommendation. It read:
“ASSESSMENT OF MERITS OF APPLICATION
If the evidence reveals that the applicant’s administration of medication was potentially unsafe, it is likely to be found that there was substantive fairness in respect of this ground for dismissal. However, the dismissal decision may have been tainted by inappropriate considerations, especially in relation to the applicant’s communication with the Board.
As to procedural fairness, in my view this was not afforded in as much as the respondent refused the applicant’s request for further and better particulars of the allegations against her. In my view it is no defence to contend that this request was not made earlier. Also, the respondent’s decision to proceed to dismiss her despite the applicant’s written response and the fact of her being certified unfit will likely be found to have been procedurally unfair.
RECOMMENDATION
THAT the respondent review its position in the light of this assessment.”
On 11 May Mr Moloney spoke to Mrs Smith by phone. He discussed the recommendation and the contents of a letter which he was about to send to Ms Garson which Mrs Smith approved. On 11 May Mr Moloney sent a letter to Ms Garson, the relevant parts of which read:
“We confirm that our client’s position is that she should be reinstated. We note the position expressed by you namely that your client is not under any circumstances prepared to consider a reinstatement of our client. We further note that no monetary offer was made by you/your client.
The writer also indicated in the course of the conference that our client was not interested in being ‘bought off’ by accepting a compensatory settlement rather than reinstatement. Notwithstanding, our client is prepared to consider any offer which your instructions may permit you to put in settlement of the claim for a monetary sum. …”

On 18 May Mr Moloney received a letter dated 14 May from Ms Garson making an offer of settlement to pay eight weeks salary which would remain open for acceptance until 24 May. (The offer was worth about $7,000.) On 18 May Mr Moloney send a letter to Mrs Smith enclosing a copy of the letter of offer and stating:
“We recommend that you reject the settlement offer but we should discuss it with you. Please therefore telephone our office to discuss the same. If the writer is unavailable at the time you call please speak with our Lena Carbone.”
On 20 May Mrs Smith spoke to Lena Carbone by phone in response to the letter. Mrs Smith stated, “The offer is absolutely ridiculous.” She confirmed her instructions to reject it. No advice was given by Mr Moloney or Ms Carbone to Mrs Smith about the possible ramifications of the offer under s110 of the Act if her claim should be unsuccessful. Ms Carbone then discussed with her arrangements to prepare for the trial.
On 3 June 1999 Mr Moloney attended at a directions hearing at the Industrial Court when directions were given for mutual discovery of documents. On 4 June Ms Carbone saw Mr and Mrs Smith for one hour and twenty minutes. They discussed potential witnesses to be interviewed by Ms Carbone and documents to be disclosed on discovery. Ms Carbone then raised the question of the plaintiff’s charges. The best evidence of the effect of what was said is in the following quotation from her file note:
“… told them that I will need to do an account to them and in all honesty it will be several thousand dollars because we had done a whole stack of work in the matter and there is a whole stack of work still to come. John indicating that he will send us a cheque for another $5,000. They asked whether they could recover this from the other side and I told them that the first rule to remember is that it is a no cost jurisdiction but there are some provisions to allow (sic) which enable the parties to seek costs in certain circumstances. I told them that because of the recommendations of Huxter, they stand reasonable prospects of getting a cost order at the end of the day, especially if we can show that there is just no merit in their allegations re the medication which is what they are handing their hat on. Told them however that they should not bank on it.”
This strongly suggests that the effect of s110(1) of the Act was mentioned to Mr and Mrs Smith on that occasion. On 10 June Mr Smith paid a further $5,000 into the plaintiff’s trust account. On 16 June Ms Carbone spent about seven hours with Mrs Smith going through documents discovered by the Employer. Shortly after 28 June Mrs Smith received a letter from the Nurses’ Board advising her that it was conducting an investigation into allegations made against her, which presumably were the 5 dispensing allegations raised by the Employer in the letter of 10 February.
On 13 July Ms Carbone spoke to Mrs Smith by phone. The best evidence of the effect of what was said is contained in the following extract from her file note:
“I told Jocelyn that she’s got an account coming and that I have given her an indication of what she can expect in relation to costs. Told her not to fall out of her chair when she gets the account because it’s very high. Jocelyn saying that they can’t stop now though. Told her that I agreed with her but that she needed to be aware of where she stood re costs. Jocelyn was hopeful of getting costs back at the end of the matter. I reminded her that she shouldn’t bank on it because the first rule in this jurisdiction is that it’s no costs and you only get costs in certain circumstances and it’s not very easy to get costs.
Got her instructions to write to Garson and tell her that we seek reinstatement and in alternative maximum compensation payable. Discussing that with Jocelyn she saying that she has doubts as to whether she could go back now. Helen Atkinson’s against her. Atkinson would be the supervisor. She also feels that most of the enrolled nurses are against her. However got her instructions to write indicating the above to Garson. Once we get the interviews and other discovery if she still feels that way then we can indicate that we no longer seek reinstatement in the circumstances. …”
On 12 July 1999 Ms Carbone had sent an account dated 8 July to Mrs Smith for the work done by the plaintiff up until 18 June, which totalled $10,835. In a covering letter Ms Carbone said, inter alia:
“The account used up the whole of the $10,000 which Mr Smith had previously paid into the trust account.”
On 13 July, and prior to it, Mrs Smith had not instructed Lena Carbone that she did not want to seek a remedy of reinstatement, and only the alternative of compensation which was a maximum of $33,100. While Mrs Smith was expressing doubts about whether she could go back she had not at that stage instructed Ms Carbone to abandon a claim for reinstatement. This is confirmed by a letter which Ms Carbone wrote on that day to Ms Garson in which she said:
“Our client continues to seek reinstatement as her primary remedy. In the alternative however she seeks maximum compensation payable under the Act namely $33,100.”
The trial was listed to commence in the Industrial Relations Commission sitting in Whyalla on 17 August 1999. Ms Carbone briefed Mr McRae to appear as counsel for Mrs Smith at the trial. She continued to have many attendances on Mr and Mrs Smith, potential witnesses and Mr McRae preparing the matter for trial. On 21 July Mr Smith paid a further $10,000 into the plaintiff’s trust account, although he had been only requested to pay $5,000. Ms Carbone was surprised by the receipt of $10,000.
Mr McRae and Ms Carbone went to Whyalla for the trial. On 16 August they there conferred with Mr and Mrs Smith and with witnesses. The trial commenced on 17 August before Deputy President Stevens. Mrs Smith was the first witness. The trial continued on 18 August when Mrs Smith completed her evidence and Mr Smith gave his evidence.
On the evening of 18 August there was a conference at the Foreshore Motel in Whyalla between Mr McRae, Ms Carbone and Mr and Mrs Smith. During the course of Mrs Smith’s cross examination Mr McRae and Ms Carbone had heard for the first time put to Mrs Smith details of what nine potential witnesses for the Employer would say about the 5 dispensing allegations and the alleged warnings previously given to Mrs Smith. Mr McRae anticipated difficulties in persuading the Deputy President to reject the cumulative evidence of all such witnesses. Again the best evidence of the effect of what was said at that conference is the following extract from the file note of Ms Carbone which read:
“…
Also raising with them our concern re the witnesses that they have put the (sic) Jocelyn that they are going to call. That is obviously of concern to us and we explained that it is very difficult for us to asses (sic) how we’ll go on that until we have heard them by which time they would have incurred significant further legal costs.
We then went on to explain the costs risks in all of this. Explained to them that there is a real risk on costs if they lose. Explained that the general rule in this jurisdiction is that’s (sic) is no costs jurisdiction and the parties can apply for costs in certain circumstances and explained that to them. Explained that if they lose then the other side will it seems to us apply for costs. Whilst it is not probable that they would awarded a an Order for costs, there is a real risk that they may be successful. The success in some regard will depend on how the case is decided ie what findings the Commission makes. Also explained to them upon their query that if we win we can also make an application for costs but similarly it is not probable that they would be awarded costs. There is a chance as it were. Also explained to them that we could for example be awarded a limited costs order as to the garbage that they have forced us to defend rather than the real issue ie the drugs issue.
Told them that they don’t have to make any decisions today but if they were looking to get out of the litigation about now would be the time to put up their hand. They looked to us for guidance and we said we would be inclined to wait and see how the evidence goes tomorrow and then to re-assess the situation. They gave us instructions to do that and continue on to tomorrow.
…”
On that occasion Mr McRae referred Mr and Mrs Smith to s110 of the Act. Although it is not recorded in her notes, I accept Ms Carbone’s evidence that at that conference Mr Smith asked what might be the quantum of any costs his wife could be ordered to pay to the Employer and she replied that all she could say was that he should look to the amount of his wife’s own costs as a guide.
The trial continued in Whyalla on 19 August. At the end of the hearing on that day Mr McRae and Ms Carbone said they were pleased with how the evidence had gone that morning and the Smiths agreed that there was no choice really but to continue for the time being. However, in its context that merely meant that there had to be a proper review of what approach Mrs Smith should be taking to the litigation as soon as a suitable opportunity arose. Next there was a further hearing in Adelaide on 25 August when the evidence of Ms Lavery was given. The trial was then adjourned to 28 September to continue in Whyalla.
On Friday, 3 September 1999 there was a conference at Mr McRae’s chambers in Adelaide attended by Mr McRae, Ms Carbone and Mrs Smith but not Mr Smith. Mr McRae went through Mrs Smith’s cross examination seeking her instructions on some of the matters raised by the cross examiner. He again warned Mrs Smith about the provisions of s110 and that there was a real risk that a costs order could be made against her if she was unsuccessful. He said he would prepare a formal letter of advice and then they would have a further conference for Mrs Smith to consider whether to continue on or to negotiate a withdrawal. Mr McRae made it clear that he was not telling Mrs Smith that she should be withdrawing, but that she needed to explore this issue so that she could give instructions. When Mr Smith picked his wife up from Mr McRae’s chambers after this conference she was upset.
On 7 September Ms Carbone received a letter of advice dated 3 September from Mr McRae. He advised that the case was likely to turn upon the 5 dispensing allegations and he expressed considerable concern as to whether the evidence of Mrs Smith would be accepted by the Commissioner in preference to that of numerous other witnesses who were expected to be called by the Employer.[3] He again pointed out the consequences in costs and said there was clearly a risk of costs being awarded against Mrs Smith if her application was dismissed. He was of the view that if the matter was to be settled by withdrawal or a negotiated settlement, the time for it was now. On 16 September Ms Carbone sent a letter to Mrs Smith in Whyalla enclosing a copy of Mr McRae’s letter. In her final paragraph she said:
“We suggest that we ought now have a further conference with Counsel to discuss the matters raised in Counsel’s letter. The conference should be either in person at Counsel’s chambers or alternatively if that is inconvenient then we suggest that a telephone conference be arranged. Could you kindly contact the writer so that we can make those arrangements as appropriate.”
[3] This letter of advice closely parallels the reasons for decision of the Commission subsequently delivered on 14 January 2000.
On 17 September Mr and Mrs Smith faxed a letter to Lena Carbone in response to Mr McRae’s letter of advice. In part it read:
“Am disturbed to realise Terry is so concerned about the evidence that may be presented by Yeltana that we may not win the case.
…
CARLA BARON
A coronial enquiry is currently underway with regard to the two oxygen bottles being left empty and another death occurring when rescusitation (sic) could not be attempted.
This makes a mockery of BARON’S efforts to place procedures at Yeltana to prevent this type of thing happening again. The current investigations will reveal deficiencies in this area and that management is still not up to the task of running an efficient operation.
In conclusion, we have to take heed of Terry’s advice but our gut feeling is that there is still some expectation of success. The threat of costs awarded against us frightens us somewhat but we have presented our evidence in an honest manner with no thought or intention to mislead the Commission. We also believe that our witnesses gave evidence in an honest and credible manner and that the evidence of LAVERY has already been discredited somewhat. We also believe that a good deal of the evidence that will be presented against Jocelyn with regard to the drug administration can be discredited in cross examination and doubt placed on this evidence. Our big belief is that procedural fairness was not given to Jocelyn at all and this point has been clearly established. Had particulars of the 16 allegations been provided before the actual dismissal and not afterwards then more informed consideration could have been given to our position. As it is and with the information now in our possession we are of the opinion that we have taken the right course of action. Surely right and honesty must prevail otherwise the whole system of Justice is ineffective.”
On 21 September Ms Carbone had a telephone discussion with Mr and Mrs Smith. The best evidence of the effect of what was said is in the following extract from her file note of it:
“Discussing with her Terry’s letter. She said that she felt like she lost a bit of confidence in Terry because she felt as though he was saying that he didn’t want to do the case anymore and I put her right on that score. I told her that it was our duty to point our the risks to her and she shouldn’t confuse that with an indication that we didn’t want to run the case for her anymore. Told her that we were pointing out the risks so that she could take stock and review her instructions as to whether she wished to continue with the matter given the risks or get out on the best possible terms. Told her that we were required to do that.
She really felt they didn’t have much choice in the matter but to continue. She indicated that she just cannot see how truth and justice possibly cannot win at the end of the day and I told her that whilst certainly we would like to all think that I reminded her that it is a matter of the Commission assessing the evidence before it. The Commission is going to sit and assess the evidence that it has and if it has got even half of those witnesses coming along and saying that Jocelyn did leave the medication around then it is going to be very much swayed by that and we will be in big trouble.
…
John asked me whether the risks were greater than we would not success or the risks were greater that we would succeed and I told him that I really couldn’t answer that question because it would depend upon how strongly the evidence of these 9 people came across and I didn’t know what the strength of it was. …
Told John though that the point of it is that there is this very real risk there that they had to appreciate.
John indicating that he and Jocelyn felt that they had come so far that they really didn’t have choice but to continue. They don’t feel comfortable with pulling out at this stage. They would see that as a concession of defeat. Also they felt that if they pulled out they would never truly know whether the Commission would have found for them and they are not comfortable with that. If that means taking the risk on costs well so be it.
I summarised for John saying that really they felt that if their application was going to unsuccessful then they needed to hear that from the Commission itself rather than pull out and wonder as to whether what might have been and John indicated that that was exactly right.
I told him therefore that given that his instructions were to proceed that we would get on with the job.
…”
On 22 September Ms Carbone wrote to Mrs Smith confirming her instructions as follows:
“…
We confirm that your instructions to us are to proceed with the action. We confirm your instructions that you are not comfortable with and are disinclined to explore withdrawing from the proceedings and would rather proceed with the matter and have the outcome determined by the Commission.
In accordance with your instructions we will now contact Counsel to prepare the cross examination of the respondent’s witnesses and closing submissions.
…”
On 23 September Ms Carbone attended at Mr McRae’s chambers and there had a telephone conference with Mr and Mrs Smith in Whyalla. Mr McRae referred to his letter and pointed out his obligations to mention the risks involved in proceeding with the matter. Mr Smith confirmed that he understood that. Mr and Mrs Smith confirmed their instructions that they wanted to proceed. There was apparently no mention by anyone about what the likely costs might be thereafter for taking the case to its conclusion.
The trial proceeded on 28, 29 and 30 September when Deputy President Stevens then reserved his decision.
On 16 November Ms Carbone spoke to Mrs Smith by phone concerning a possible contested hearing before the Nurses’ Board concerning her registration but Mrs Smith was not inclined to contest the matter.
On 19 November Ms Carbone prepared a further account for the plaintiff’s charges between 19 June and 11 November which totalled $26,812 including disbursements of $2,562. On that day she left a message on Mrs Smith’s answering machine that the account was coming and she expected they might be quite surprised by it. By a letter of 22 November Ms Carbone sent the account to Mrs Smith together with a trust account statement showing $8,828 had been paid to Mr McRae for his fees out of the moneys held in trust and also detailing other expenses paid out of the trust account. On 30 November Mr Smith spoke to Mr Moloney who agreed to accept a down payment of $10,000 and the balance in January 2000. He paid $10,000 on 3 December.
On 14 January 2000 Deputy President Stevens delivered his decision dismissing Mrs Smith’s application. He published detailed reasons. In broad terms he accepted the Employer’s witnesses on the 5 dispensing allegations and held that was sufficient to justify the summary dismissal. He generally upheld the Employer’s other allegations, but would not have found that they in themselves justified a summary dismissal. On that day Ms Carbone spoke to Mr Smith who indicated he wanted to have someone independent check to see if the plaintiff’s account was fair. On 19 January Mrs Smith wrote to the Law Society about the matter and that led to an assessor from the Legal Practitioners Conduct Board reviewing the quantum of the costs who later reported that most of them were justified.
The Employer made an application to the Industrial Commission for costs against Mrs Smith under s110 of the Act. On 31 January Mrs Smith wrote a long letter to Ms Carbone setting out detailed arguments as to why she was allegedly justified in continuing with the hearing. Much of it was argument against the Deputy President’s findings and criticism of the way Mr McRae had handled the case at trial. Another lawyer retained by Mrs Smith appeared as counsel for her to oppose the costs application, but on the instructions of the plaintiff’s firm. On 11 April 2000 Deputy President Stevens ordered that the Employer have its costs of defending the matter as from 15 July 1999, being a date soon after discovery of documents by which time he considered that Mrs Smith should have appreciated the case against her to be presented by the Employer. On 12 April Ms Carbone rang Mr Smith who suggested that some of the Employer’s witnesses at the trial had perjured themselves.

On 8 August 2000 Mrs Smith wrote to the then Attorney-General complaining about the decision of the Industrial Commission. In September 2000 there was a dispute between Mr and Mrs Smith and the plaintiff about what was the balance owing on the plaintiff’s account after taking into account all the payments into and out of the trust account. The Smiths incorrectly alleged that there was only a balance owing of $9,633. On 17 October the plaintiff rendered a further account for $2,110 to Mrs Smith for work done between 19 November 1999 and when its instructions were terminated on 7 June 2000.
In December 2000 the costs of the Employer pursuant to the order of 11 April 2000 were taxed at $59,037. Mr and Mrs Smith negotiated a compromise with the Employer by which it accepted $45,000 for these costs, which was paid by Mr and Mrs Smith.
The witnesses
Mr Moloney was a reliable historian insofar as he was able to refresh his memory from his comprehensive and contemporaneous file notes. He did not have much independent memory of relevant events, but much of what he said was his general practice in such cases is likely to be what occurred.
Ms Carbone was an impressive witness. She also was able to give reliable evidence from her contemporaneous file notes. She had some recollection of matters which were not recorded in her notes which I accept.
Superficially Mrs Smith presented as a well spoken professional nurse. However, her demeanour in the witness box was unusual and it came as no surprise to me to find that she had been diagnosed with major psychiatric illnesses. She appeared to be quite convinced that she was entirely in the right and she was unable to appreciate that this might not be objectively verified by other evidence. Her denials that she was not angry, hostile and belligerent in writing the letters of 27 and 29 January 1999 was beyond belief. The fact that much of what she said occurred in her dealings with the plaintiff is inconsistent with the plaintiff’s reliable file notes shows that she is not a good historian and cannot generally be relied upon.
Part way into her cross examination Mrs Smith broke down in the witness box and the Court had to adjourn. Subsequently, two psychiatrists reported that she was suffering from major psychiatric illnesses of depression and anxiety and it would be injurious to her psychiatric health for her to undergo any further cross examination. Accordingly, the trial proceeded without her cross examination being completed. This is not any prejudice to the plaintiff as on that part of her evidence which I did hear I have concluded little, if any, weight was to be placed on her evidence on contested matters.
At one stage counsel for Mrs Smith suggested that her psychiatric condition explained away certain inconsistencies in her evidence and might be used to show that she did not understand what she had been asked. However, the psychiatric reports were only admitted into evidence for the limited purpose of showing that Mrs Smith was not fit to complete her cross examination. There was no concession that this psychiatric evidence could be used to explain away some of the evidence which she gave which probably favoured the plaintiff. I informed Mrs Smith’s counsel that if he wanted to pursue that topic he would have to call a psychiatrist, but he did not do so.
The evidence of Mr Smith was also not convincing or particular reliable. As will be related later he gave versions of how his wife rejected the offer of 18 May and the advice of Mr McRae of 3 September which are quite inconsistent with my other findings. His evidence about what was said at the meeting on 18 August concerning the risk of his wife being ordered to pay costs was contradictory and unconvincing. He clearly down-played his evidence about his feelings and emotions in the latter part of January and early February 1999 concerning his wife’s then dealings with the Employer and his conversation with Ms Lavery. Overall he presented as a person who had made a disastrous decision in risking a large amount of legal costs in reliance of his wife’s credibility, and who was now desperately trying to avoid the major economic consequences of it. His labelling of the plaintiff’s claim for the full amount outstanding as under-handed, unscrupulous and disgraceful was not justified on the evidence and he had to concede that an assertion on which this was based of non-disclosure by the plaintiff of payments out of the trust account was incorrect.
Mr Smith was clearly the dominant partner in the marriage. He handled the finances and made the major decisions. Their respective evidence about the input of Mr Smith into the letters sent by Mrs Smith was not entirely consistent. While Mrs Smith always concurred in the contents of letters which she signed it is likely that some parts of them were composed by Mr Smith.
I accept the evidence of Mr McRae. It was not challenged and he was not cross examined. While parts of the counterclaim plead a failure by him to properly advise Mrs Smith that was not pursued at trial.
The prolix, repetitious and convoluted counterclaim in its finally amended form can be distilled into five basis of claim relied upon by Mrs Smith:
The case would cost up to $10,000.
Mr Smith claimed that at the meeting of 12 April Mr Moloney in response to his question “How much is this going to cost?” answered “Up to $10,000 if it goes to Court.” Mrs Smith also claimed that this was said by Mr Moloney, but it is likely that she had heard it second-hand from her husband. I accept Mr Moloney’s evidence that he did not say it or anything like it.
If it had been said, its falsity was apparent as soon as Mrs Smith received the account dated 8 July which showed that the amount of $10,000 had already been exceeded by the plaintiff’s charges for work done up to 18 June. Mr Smith gave some vague and unconvincing evidence that he had raised the point with Ms Carbone shortly afterwards, but he said she did not respond and he did not press it. I accept Ms Carbone’s denial that Mr Smith never said any such thing to her. If he genuinely believed that he had received a quotation for $10,000 for the costs of the whole case, he would have pressed it far more strongly in July 1999 as he then well knew there was still much more work to be done. The next mention of the point was a belated one in the letter from Mrs Smith to the Law Society in January 2000.
There can be no actionable contractual term, representation or misleading or deceptive conduct based on this allegation. Even if there were some substance in it, it is highly likely that it was waived by Mrs Smith’s conduct in July 1999.
Representations by the plaintiff about a strong case and likely success
Mr and Mrs Smith claim that on a number of occasions Mr Moloney and Ms Carbone told them that Mrs Smith had a strong case and would succeed or words to that effect. I reject that anything like that was said by Mr Moloney at the meeting after the Conciliation Conference on 6 May as it is inconsistent with his file note recording that he “tentatively” expressed the view that Mrs Smith ought to proceed. On a number of occasions Ms Carbone told Mr and Mrs Smith they had a good case and would succeed, but I accept her evidence that such statements were always accompanied by her saying words to the effect that it was conditional upon the Industrial Commission accepting the truthfulness of the evidence of Mrs Smith. Mrs Smith in cross examination conceded that such advice had been given with a preface like “on your instructions”, although Mr Smith denied it. I reject the defendant’s contention that the plaintiff was seeking to drive and promote the litigation, presumably for its own financial benefit, by overstating Mrs Smith’s prospects of success. The clear inference is that both Mr and Mrs Smith had an entrenched and unshakable belief that Mrs Smith was telling the truth and therefore would succeed. However, throughout the case they both well understood, although they did not relish the thought, that contrary evidence to discredit Mrs Smith was likely to be adduced by the Employer, and, if that evidence was preferred to that of Mrs Smith, she was likely to lose the case. The lawyers also well appreciated this, and therefore made their advice conditional on Mrs Smith’s evidence being believed.
Accordingly, there is no representation or misleading or deceptive conduct based on any such alleged statements by the plaintiff which can be actionable by the defendant.
The additional payment of $10,000 on 21 July 1999 would be sufficient to cover all further costs
At the time when Ms Carbone requested a payment of a further $5,000 into trust for costs, which was apparently on 13 July 1999, Mr Smith claimed that he had offered to pay $10,.000 and had said to Ms Carbone, “Surely this will see us through Lena”. He said she did not respond and said nothing about it. Even if his evidence on this is correct, the lack of any response from Ms Carbone was so equivocal and ambiguous that it could not have amounted to a contractual term, a representation or misleading or deceptive conduct that the rest of the case would cost no more than $10,000. However, I accept Ms Carbone’s denials that any such offer of $10,000 was made or that Mr Smith said, “Surely this will see us through Lena”. In any event when the account of 19 November was received for $26,812 Mr Smith made no complaint about it grossly exceeding any represented amount of $10,000. Mrs Smith was probably correct in her evidence on this topic in saying that having voluntarily paid a further $10,000 they merely hoped that would be enough.
There is no actionable contractual term, representation or misleading or deceptive conduct based on this topic.
The plaintiff’s duty to advise the defendant of the likely amount of her legal costs
The total costs and disbursements, including counsel fees, payable by Mrs Smith to the plaintiff was about $48,921.[4] There was no challenge at the trial to this amount being the proper charge for the work done. At no time prior to the completion of the trial were Mr and Mrs Smith ever aware they would be liable for an amount approaching $50,000 for the costs of Mrs Smith’s legal representation in the action. I will deal later with what were their expectations prior to the conclusion of the trial, but I have no doubt they were surprised and shocked at the final figure. Indeed Ms Carbone herself also was surprised when she prepared the first two bills as to their respective amounts.
[4] This amount includes some charges for Mrs Smith's workers compensation claim, but it is unclear how much.
Prior to the conclusion of the trial the only indication which the plaintiff gave to Mrs Smith about her costs was that the case would be “very expensive”. Ms Carbone said that it would have been very difficult, and virtually impossible, to have given a prior estimate of the cost of the action. While the uncertainty and complexity of the litigation did make it impossible to predict the actual amount the plaintiff could by at least mid July 1999 have given Mrs Smith a meaningful estimated range within which the costs were likely to fall depending on the length of the trial and other factors. By then the plaintiff knew the rate of the charges of Mr McRae, that the trial was to be held in Whyalla, the likely witnesses for Mrs Smith and something of the Employer’s likely case from the discovered documents. If the exercise had been performed in about mid July 1999, I find that the plaintiff could, and should, have estimated a range of its likely costs to Mrs Smith of her legal representation to the end of the trial in a span that would have encompassed what she was actually charged, albeit that it would probably have been towards the top end of the range.
Even prior to about mid July 1999 the plaintiff could have given a more meaningful estimate of the likely costs than “very expensive”, but it would not have been as definitive as one that could have been given in, and after, mid July. However, by mid July Mrs Smith knew the amount of the plaintiff’s costs up until 18 June and that there would be substantially more costs to be incurred to bring the matter to trial and she did not suggest that the amount of the costs to that point in time affected her resolve to proceed with the case. Accordingly, any breach of duty by the plaintiff on this head could only relate to mid July and onwards.
The defendant pleaded that the plaintiff owed her duties in contract and tort and fiduciary duties and that it was guilty of misleading or deceptive conduct contrary to the Fair Trading Act 1987 in what it said, or did not say, about the amount of its future costs. I doubt that there was any actionable misleading or deceptive conduct in this regard, but I need not pursue it as Mrs Smith could be in no better position in the circumstances of this matter if she succeeded under the Fair Trading Act 1987 than if she succeeded in contract.[5] Likewise Mrs Smith would be in no better position in tort or for breach of fiduciary duty than if she succeeded in contract. Hence I will confine these reasons principally to the cause of action in contract.
[5] A similar conclusion also applies for the cause of action dealt with below concerning failure to advise on the effect of s110 of the Act.
It is trite that there was an implied term in the plaintiff’s retainer that it would give all necessary and proper advice to Mrs Smith which she needed to decide upon her instructions whether or not to prosecute her unfair dismissal claim: Heydon v NRMA Ltd (2000) 51 NSWLR 1 particularly at 53-4.
There was no expert evidence about what the reasonably competent solicitor in the position of the plaintiff would have done in the circumstances. However, in relation to solicitors the Court can use its own knowledge of the practices of the legal profession in deciding on the extent of a solicitor’s duty: Neagle v Power [1967] SASR 373 at 376; Jennings v Zilahi-Kiss (1972) 2 SASR 493 at 513; Heydon NRMA Ltd (above). I do not need to go into the legal issue about whether the contents of the applicable Legal Practitioners Conduct Rules are to be incorporated as implied terms in the retainer or are otherwise to be treated as definitive of the solicitor’s duty.
In the circumstances of Mrs Smith’s case in the Industrial Commission the substantial amount which she was risking in legal costs was clearly a material consideration for her in deciding whether to pursue, continue or settle the litigation. I will deal later in more detail with what was at stake for Mrs Smith in economic terms, but on any possible view of the matter what she would have to pay to her own lawyers to obtain the legal relief to which she believed she was entitled was a material factor for her in any decision to pursue the litigation.[6] Thus in the circumstances of this case there was a duty on the plaintiff to advise Mrs Smith by at least mid July 1999 of a range within which her costs to the completion of a full trial would have fallen which would have encompassed what subsequently transpired to be her actual liability. The plaintiff breached this duty.[7] It was not sufficient merely for the plaintiff to have told her that she was being charged on the Supreme Court scale under which the hourly rate was $165 per hour and to say that it would be “very expensive”.
[6] This is particularly so where it was primarily a no costs jurisdiciton under s110 of the Act, and so she could be substantially out of pocket even if she was wholly successful.
[7] It was encumbent on the plaintiff to give this advice irrespective of whether Mrs Smith asked for it.
The plaintiff’s duty to warn on the consequences in costs of rejecting the offer of settlement
The costs order in favour of the Employer made against Mrs Smith on 11 April 2000 was primarily based on her having acted unreasonably in refusing the offer of 14 May 1999, or at least in not having responded by making her own offer of settlement.[8] While I accept that prior to that offer lapsing on 24 May 1999 the plaintiff had orally informed Mrs Smith of the general operation of s110 of the Act about costs, and including about its relevance generally to offers which were not bettered, I consider that its duty extended to warning her specifically in relation to that offer that if she did fail in the case because she was not believed or for any other reason her rejection of that offer could be regarded as unreasonable conduct on her part and so precipitate an order for costs against her. That advice should also have included some indication of the likely quantum of the costs which might be ordered against her. The advice given on 18 August, and subsequently on that issue, that they would be comparable with her own costs would have been adequate, although it would have had to be in conjunction with a proper fulfilment of the other duty of the plaintiff to advise on the likely quantum of its own costs. The plaintiff was also in breach of this duty.
[8] The letter of 13 July mentioned above was not an offer of settlement by Mrs Smith but in effect a demand for capitulation by the Employer.
Causation
Although they are ultimately two separate questions, it is convenient to deal together with the issues of whether the two breaches of duty mentioned above by the plaintiff caused any loss to Mrs Smith as they both involve many common issues. To succeed Mrs Smith must show on the balance of probabilities that if the plaintiff had fulfilled the duty in question to give proper advice she would have then acted in a manner which would have avoided all or some of the loss claimed: Allied Maples Group Ltd v Simmons [1995] 4 All ER 907, [1995] 1 WLR 1602; Chappel v Hart (1998) 195 CLR 232; Hotson v East Berkshire Area Health Authority [1987] AC 750.[9] If she could not show it, the necessary chain of causation would not have been demonstrated. This involves a difficult exercise of hypothetically exploring what Mrs Smith would have done in relation to the litigation if she had been properly advised by the plaintiff.
[9] Even if the onus was on the plaintiff on the balance of probabilities to show that Mrs Smith would not have acted differently if it had fulfilled its duty, I would for the reasons following have found that it had discharged that onus.
Both Mr and Mrs Smith gave evidence to the effect that if Mrs Smith had been advised that her own costs would be nearly $50,000, or there was a risk that she would have to pay the Employer’s costs of $45,000, she would not have pursued the proceedings. I do not accept that evidence. They were ex post facto rationalisations with the benefit of hindsight and they are inconsistent with the other evidence about Mrs Smith’s state of mind at the relevant times. Their evidence on the topics was based on them acting purely on economic considerations, but there were more powerful non economic factors at work.
Fundamental to Mrs Smith’s state of mind throughout the whole Industrial Commission proceedings, and even afterwards, was an unshakeable belief that she was almost certain to win the case because she was telling the truth. Neither during the Industrial Commission proceedings, nor during her evidence in this trial, did she seem to have a realistic or rational appreciation of the capacity of contrary evidence to undermine her assertions. She simply fervently believed in the righteousness of her cause. Mr Smith took a similar position.
In their evidence Mr and Mrs Smith treated the economic amount at stake in the Industrial Commission proceedings as the maximum amount of compensation payable if she did not get reinstatement, which was $33,100. If she had obtained reinstatement, the economic stake would probably have been much higher in that she would have been awarded her full wages from the time of the dismissal until the reinstatement and she would have had the salary from that professional employment for some substantial time into the future.[10] I reject Mrs Smith’s evidence that after the Conciliation Conference on 6 May 1999 she abandoned any claim for reinstatement. I accept the evidence of Ms Carbone that while after that Conference she expressed doubts about whether she would go back, she did not give instructions to abandon the claim for reinstatement until close to the trial. Although she denied it in evidence, I find from her letter of 31 January 2000 to the plaintiff that during the course of the Industrial Commission proceedings she believed that if she lost the case she would have no prospects of finding alternative employment as a registered nurse which, subject to her psychiatric recovery, would have been a substantial economic detriment to her. Another economic factor was that to some significant degree the success of her workers compensation claim against the Employer was dependent upon her summary dismissal not having been justified. Also Mr and Mrs smith entertained a substantial hope that under s110 of the Act the Employer would be ordered to pay her costs, which also caused her to discount the degree of financial risk which she faced in the case.
[10] As I put to Mr Moloney, if she had obtained an order for reinstatement but the Employer was not prepared to have her back under any circumstances, she had a powerful tool to negotiate a larger payout than the maximum compensation under the Act.

In addition to these economic factors there were a number of substantial non economic considerations which were influencing Mrs Smith. These were:
·She wanted a judicial validation of the issues raised in her letters of 27 and 29 January 1999 and a victory in her ongoing and bitter dispute with the administration of the Employer. Although both she and Mr Smith sought to down-play it in their evidence, this correspondence shows that Mrs Smith exhibited a great depth of animosity and belligerence in pursuing her dispute with the administration of the Employer.
·Mrs Smith’s honesty, good name and professional reputation as a nurse had been put very much in issue and she wanted them vindicated.
·The communications from the Nurses’ Board showed that there was a risk of her registration as a nurse being challenged if the 5 dispensing allegations were upheld. While later in 1999 she did not actively contest a proposed inquiry by the Nurses’ Board that was not her position during the Industrial Commission proceedings.
·As was told to Mr Moloney on the first interview the Smith’s regarded the actions of Ms Lavery as an attack on Mr Smith in the sphere of Whyalla local government politics.
·There was some concern in 1999 that any finding of the Industrial Commission that the summary dismissal of Mrs Smith was justified might be used, and publicised, by Mr Smith’s political opponents in the next mayoral election in Whyalla in 2000.[11]
These non economic considerations were a powerful incentive for Mrs Smith to pursue the unfair dismissal claim even though the economic costs of doing so might be very substantial.
[11] In fact this did not occur, but I find it was a legitimate area of concern in 1999.
On this hypothetical issue of what Mrs Smith would have done if she had been properly advised on likely extent of the cost of her legal representation, it is relevant to look at what she did know about the likely amount of the costs for which she could be liable. She had been told on 6 May that the case would be “very expensive”. While this is a relative term it nevertheless should have alerted her to at least the possibility of big sums of money being involved. By mid July she knew that her costs up to 18 June were $10,600 and she must have realised that there was still a long way to go as she had been told the trial would occupy at least five days. She should have appreciated that her own legal costs were likely to be at least some tens of thousands of dollars, albeit not necessarily as much as nearly $50,000. There is also some significance in neither Mr nor Mrs Smith having pressed Ms Carbone for more interim accounts or a definite estimate of the likely total costs. She realised she was being charged principally on a time basis for the amount of work being done. In effect she was giving the plaintiff a blank cheque to be completed at the end of the case. This is very much the approach of someone who desperately wanted to win, and was prepared to pay whatever was necessary to achieve that result.
The best and most direct evidence of the attitude of Mr and Mrs Smith in pursuing the unfair dismissal claim is what occurred in August and September 1999 when they had to decide whether to continue with the trial to its end or to back down because of the risks of losing. Their evidence about this was neither candid nor plausible. Mr McRae properly and adequately raised the issue with them at the conference on 18 August, but they were so entrenched in the forensic contest that they could not then come to terms with what Mr McRae was saying to them. At the conference on 3 September the realistic difficulties in succeeding were brought home to Mrs Smith. Her distress after that meeting was not principally due to realising that she was at risk to pay costs to the Employer because she never thought she would lose, but because Mr McRae was telling her there was a real risk of her losing and she was losing faith in him being able to win the case for her.
I interpose at this point a finding that I reject the evidence of Mr Smith that there was any telephone discussion between himself and Ms Carbone on 6 September in which she expressed any more optimistic view than Mr McRae on the prospects of success or gave any encouragement to Mrs Smith to continue the case. I accept Ms Carbone denials about this. There was no mention of it in the letter of 17 September which would be expected if it had occurred. In any event it is quite inconsistent with the position which Ms Carbone expressed on 21 September. The decision taken by Mr and Mrs Smith to pursue the trial was their own and was not influenced by any advice contrary to that of Mr McRae which was allegedly given by Ms Carbone.
Strong evidence of the non economic factors influencing Mrs Smith is the contents of the letter of 17 September 1999, which is quoted in part above, which was faxed to Ms Carbone within a matter of hours of the Smiths’ receipt of Mr McRae’s letter of advice and Ms Carbone’s letter of 16 September. It is predicated on a resolute belief by Mr and Mrs Smith in the rightness of their cause: “Surely right and honesty must prevail otherwise the whole system of Justice is ineffective.” It ignores the suggestion in Ms Carbone’s letter of 16 September that there should be a conference to discuss the possibility of any settlement or withdrawal. In his cross examination Mr Smith said they did not consider the option of a withdrawal. He said he did not know what was meant by Mr McRae’s reference to a withdrawal and he did not ask what it meant. The letter does not raise economic questions such as how much might be saved if there was a settlement or withdrawal. As the subsequent communications revealed the effect of Mr McRae’s advice had been not to bring Mr and Mrs Smith to a realistic assessment of the risks which they faced, but to cause Mrs Smith to interpret Mr McRae’s advice as him letting them down and him having no heart for the fight. Having gone that far in the trial, and having already risked so much in costs, it was tempting for them to see it through to the end so that there would be a definitive result. However, Mr and Mrs Smith still believed that result would be vindication for them and not a disaster. If it had been principally an issue of economics, they would have asked questions about the amounts involved and have pursued the suggestion of a conference with Mr McRae to further explore the options for getting out of the litigation.
I find that if Mrs Smith had been advised by the plaintiff in mid July, or even earlier, that her likely legal costs, if the action did not settle, could have been as high as in the vicinity of $50,000, she would still have pursued the action and would not have withdrawn. Hence the failure of the plaintiff to advise her properly on this topic has not caused her any loss.
When Mrs Smith spoke to Lena Carbone on 20 May to respond to the letter enclosing the offer of 14 May her immediate and dismissive comment was to the effect: “The offer is absolutely ridiculous.” This was her instinctive reaction and indicative of her state of mind that she wanted vindication and not compromise. If her motivation had been substantially economic, it would be expected that she and her husband might have explored the economic implications of the offer such as what were the plaintiff’s costs to date and how much would she get in her pocket if she accepted the offer.
If the plaintiff had properly advised her on the possible implications under s110 of the Act if she rejected the offer and subsequently lost the case, I find that she would still have rejected the offer and would not have embarked on any successful process of negotiation in an effort to reach a compromise. She did not say she would have accepted the offer, or even have considered accepting it, if she had been specifically advised of the risk under s110 of the Act. Because of her unshakeable belief in the rightness of her cause she would only have treated the risk as miniscule and not of sufficient weight to deflect her from having her position vindicated by a judgment in her favour by the Industrial Commission. Her interest in s110 of the Act was in the possibility of getting an order for her costs against the Employer. I reject the evidence that she acted principally on the advice of the plaintiff in rejecting the offer. She was likely to have rejected it even if the plaintiff had advised her to accept it!
Misleading and deceptive conduct by silence
The defendant’s counsel further submitted in effect that the failure of the plaintiff to advise Mrs Smith of the likely amount of her legal costs and of the effect of s110 of the Act on the settlement offer was misleading or deceptive conduct through silence contrary to s56 of the Fair Trading Act 1987. I do not accept this. Authorities on misleading or deceptive conduct by silence relate to the failure to disclose relevant facts: see generally “Miller’s Annotated Trade Practices Act” 25^th edition, paras 1.5, 2.50 and 1.52.96; “Halsbury’s Laws of Australia”, volume 5, paras 100-120. Here what is complained of is the failure to express opinions and not facts. There was no mis-statement of fact as such. I am not aware of any authority that suggests s54 of that Act can be used in conjunction with the principles of conduct by silence. In any event, even if there was misleading conduct by silence, for the reasons already given there was no causation established that such conduct gave rise in any way to the defendant’s loss.
CONCLUSION
Accordingly, the counterclaim fails. There will be judgment for the plaintiff on both the claim[12] and the counterclaim.
[12] The defendant's counsel made no submissions that the quantum of the claim as pleaded was not the correct amount if the causes of action raised by the counterclaim failed.
In addition to the judgment sum of $18,647.80 the plaintiff is also entitled to pre-judgment interest under s39 of the District Court Act 1991 at a commercial rate since the debt became payable until judgment. I fix a lump sum in lieu of such interest at $5,000. There will be judgment for the plaintiff on the claim for $23,647.80.